Perhaps the Year's Most Biased Article: "The Real Problem with Credit Cards: The Cardholders"

Ask the flight attendant for a fresh motion-sickness bag and prepare to :puke: your guts out.

http://news.yahoo.com/s/time/20090512/us_time/08599189736200

Credit-card companies, though, may not be the only ones we need to be protected from. Every penny of Americans' nearly $1 trillion in revolving debt started with someone - some individual person - whipping out a piece of plastic and making a decision to use it. We could consider that free will and just call it a day, but there's plenty of reason to believe the story isn't so simple. There are piles of evidence that people are bad decision makers when it comes to how they use credit cards. Even when presented with full and fair information, they often make decisions that are not in their own economic best interest - a reality only partly taken into account by the new rules and pending legislation. (Read a brief history of credit cards.)

Consider the teaser rate. More than a third of consumers pick one credit card over another based on which issuer has the lowest introductory interest rate. And yet people often do so in a way that leaves them with higher finance charges over time. In one study, University of Maryland economists Haiyan Shui and Lawrence Ausubel watched people pick a card with a teaser rate of 4.9% for six months over a card with a teaser rate of 7.9% for 12 months. That would make sense if the people then paid off their balances within six months. But many didn't - the average balance for the year was $2,500, with plenty of folks paying more in interest charges than they would have had they opted for the other card, considering the rates on each spiked to 16%....

Once we've got our card in hand, our behavior becomes riddled with irrationalities. In one experiment, Drazen Prelec and Duncan Simester of the Massachusetts Institute of Technology found that people were willing to pay twice as much for basketball tickets when they were using a credit card as opposed to paying cash. Credit-card spending just doesn't feel like real money. In another study, Nicholas Souleles of the University of Pennsylvania and David Gross of the consultancy Compass Lexecon calculated that the typical consumer unnecessarily spends $200 a year in interest payments by keeping a sizable stash of cash in savings or checking while at the same time carrying a credit-card balance. In our heads, the two don't line up."

Well, I just learned something. Of course the poor put-upon giant credit card issuers aren't to blame for the wreckage of the financial markets. It was those damn middle-class vultures all along. I knew it! I just knew it! :sarcasm:

edit: italics

Americans as a whole are wildly irreponsible with their credit cards, and people do bear a measure of individual responsibility for their foolish use of credit.

That's not to say that there should not be more effective regulation of the credit card industry, but short of having a government minder accompanying every person that goes to Best Buy with a credit card in his wallet, people are going to have to take some responsibility for how they choose to use credit cards.

That implies that everything would be peachy keen if only those reckless spendthrifts would buckle down and live within their means, and shifts blame away from the predatory lenders.

Of course, our current economy is somewhat predicated on us doing just the opposite, so some changes obviously need to be made both on the supply side and the demand side of the credit industry.

Is it their fault too when the clowns decide to lower your limit and raise your interest rate because you carry no or low balance? If your history of payment is ALWAYS paying on time and more than the minimum, why should you get penalized by the company and then belittled by idiotic articles like this.

I'm not defending deceptive or unfair credit card practices. I'm pointing out that the American consumer bears a large portion of the blame when it comes to irresponsible credit card usage.

When your limit drops to $500 from $3000. What do call that except a screwing? This has actually happened to people that never missed a payment and had little or no balance.
Personally if it happened to me I would screw right back. I'd run every card I owned up to max and then say "Fuck You"

I don't advise that as a financial or political strategy.

And here in TX there ain't nothing they can do about it. One of the few things here in TX that favors the little person. The only thing they can garnish your wages for here is nonpayment of child support or taxes. Can't touch your house, car or the tools of your trade. And even if they win a judgment they have to file it in every county courthouse in the state-all 254 of them, at their cost-to put a lien on any property I might buy beyond my homestead.

If I play by the rules and get screwed anyhow, I'll screw right back.

an interest rate hike does not bother me since my cards all have a 0% rate if paid in time. Which is the only sensible way to use them unless you are desperate or have a low intro rate. I have had 0% for 12 months or 3.9% until paid off in which I carried a balance. As for lowering the credit limit, that would just mean I quit using their card, so why would they want to do that?

Back when they started, it was a straightforward arrangement, you got a card with a fixed limit, paid a fixed rate on anything you didn't pay off that month, 18 3/4% usually, and the interest rate itself was motivation enough to get the sucker paid off ASAP if you'd charged something like your dream vacation or starting a small business on a shoestring.

Then they brought in the idea of monthly minimums, limits that were automatically raised when the holder exceeded them, teaser interest, and junk fees, oh, the junk fees.

What those monthly minimums did was cause a cardholder to pay off a debt many times before it was finally discharged. Those neverending limit raises encouraged him to stay in debt, and those fees provided the card companies with a little something extra.

It was a setup, in other words, and a lot of people in this country fell for it, hook line and sinker.

Now they're changing the rules again, raising the interest rates far above the original high rates on any pretext, changing due dates without notification to trigger junk fees and more interest hikes, and generally behaving the way some of us always knew they would.

What Congress needs to do is focus on that stuff, not heaping blame on the folks who got fooled by it. Put the rules back the way they were, encouraging people to pay those puppies off by lowering the limits far below what the big debtors owe and lowering the interest rate to something that can reasonably be discharged.

It goes without saying that a big help will be raising wages where people can afford to buy what they need without using that damned plastic debt.

that Americans as a whole are not wildly irreponsible when it comes to credit cards. There is plenty of blame to go around in this.

Other forces were responsible for paying them less than they needed to live on.

almost everybody buys things that they don't "need".

Yes, there were predatory lending practices. Yes, credit card companies are often run by amoral leeches. But the bottom line is if you don't spend money you don't have by waving your magic plastic card you can't get in trouble.

Acknowledging that rather obvious fact is not somehow saying everything the Credit Card companies did was peachy and they have no blame here.

and getting people to buy your product/service based on things advertised in bold, and nullified somehow in the fine print.

i say regulate the hell out of that.

(i almost never carry a balance and never carry one over $1000, however after i left school and ran out of money while looking for work, my balances went over $3000, but it was that or eating and was quickly paid down once i had steady work)

Bottom line is they still can't get you with that fine print unless you run around spending money you don't have. Or unless part of the fine print is "next year we're raising your annual fees to $3000" or something.

because none of their credit limits were over $3000. About a year later when they had maxed all of their cards out & were in dire straights & didn't know why, they counted up how many cards they had & it was over 20! They owed over $60k on credit cards!

But as irresponsible & stupid as this couple was, my question goes back to the credit card companies that continued to offer them new cards even as their credit report had to show increasing balances on the multiple cards they already had. My husband & I have a card that has a limit that is only a few thousand less than our annual income. The limit was increased during a period when our income was over twice what it is now. I assumed at some point in time, the card company would re-evaluate our account & income & make adjustments, but it's been 18 months & no decrease.

I think as long as your credit score is good they card companies don't look at the details - they don't look to see how many cards you already have & what the limits are on those cards & what kind of financial shape you would be in if you maxed all of them out. They just keep sending you applications until you get in a bind & then it's your fault. It's really bad business. The card companies could have decreased this problem with a some diligence & higher standards.

There's plenty of blame to go around, but the media will run with stories like the one the OP posted. And individuals who are not feeling the pinch yet, will sit in self-righteous judgment of others, who made bad decisions or encountered unfortunate times & find themselves in an untenable situation.

The Real Problem with Economy: People Who Don't Work

The Real Problem with Iraq War: Iraqis Who Live In Iraq

etc. etc.

:hi:

:hi:

Perfect analogies.

and people have no idea what they're doing. No money, no problem!

Last week someone here posted that they just figured out how amortization works.

:crazy:

& it's not the reason debt increased.

I know that there are people in credit card debt because of (for example) medical bills or other emergencies, but *** FROM PERSONAL OBSERVATION *** lots of people just have to have another toy.

I have never had any credit card, but I also don't have a boat or an iTouch or a pool table or a Harley or etc. etc., things which a lot of people in my income bracket have.

"Even when presented with full and fair information." Wotta laff!

If I shout in your face for a solid year that up is down, and whisper once during that time that up is really up, that's not a "full and fair" presentation of information. Why does Capital One ("What's in your wallet?") or VISA ("It's everywhere you want to be") spend all those millions on advertising? I don't think it's because they want to burn off some capital; I'm guessing they do it because it works. And two sentences in three-point type in a densely-printed "Notice to Cardholders" brochure is hardly going to offset the millions spent on focus groups, ad writers, consumer psychologists, researchers and all the rest of the advertising budget of major creidt card companies.

when times are bad, they tell you you were a fool to do it.


common thread: owners & management are never responsible for anything.

"I am a rock, I am an island."

When the president gets on camera and shouts, "take a vacation; spend money" or words to that effect, and the credit card industry happily makes that easy to do, there are many people who will irrationally respond, being good little patriots and spending, regardless of what their personal economic situation is.

Financial finger-waggers would have you believe that credit problems are all about individuals failing to exercise personal responsibility. To them, it's all about personal morality -- if you were just a better person, you'd be able to avoid debt.

But this article makes it clear how credit card companies exploit flaws in reasoning that we *all* share to make a buck. It's not about some nebulous factor labeled "personal responsibility" that rich people have and poor people don't; it's about very specific ways in which the human brain miscalculates risk. Lawmakers should study this kind of research if they want to enact effective solutions to the credit card catastrophe.

This is actually a common problem in journalism. Most reporters lean left -- but many editors lean right, and the bastards write the headlines, which is all that most people ever see.

I agree; the headline makes it sound like we're going to read one of those screeds about personal responsibility. But the article is a useful intro to the psychology of risk assessment.

on edit: And your point is borne out by the posters on this thread who are using the headline as an launchpad to start blaming the victim.

can arbitrarily change the terms of a person's contract. There was a story not long ago (on PBS' Frontline, I think) about this very subject. One of the people they talked to was a woman who was paying a little extra every other month or so to pay her card off sooner and the company rejiggered her account so that her payment went from her original amount to her over-payment amount.

Another woman's credit card company lowered her available credit limit to below her current balance without notifying her that they were doing so, so she was being socked with her monthly payment plus a penalty for being over her limit. She told them she had recently been laid off and they basically said, "Tough shit." They relented, IIRC, after Frontline called them.

Some companies are even considering an additional fee if you pay off your balance every month! That's nuts--"Thank you for being responsible and making your payments in full and on time. You will now pay us an additional $30 whether you want to or not."

Must be nice to be the people who make the rules when they can change the rules at any time to favor themselves.

....I'd tear em up and toss em! I use plastic to pay for everything. It's a convenience. I pay them off every month to avoid finance charges. But, I can just as easily write a check....and will! I might even start paying cash for everything.

My first card was an American Express in 1980. I never used it, but I did pay a $35 charge for having it. I cut it up and cancelled it immedieately when I realized this. It's like the bank charging you for keeping your money....fuck that machine!

I learned early in life that success was all about money management